Nestle India Ltd. Vs. Collector of Central Excise - Court Judgment

Excerpt:
1. these are two appeals involving common issues and therefore they are clubbed together and are being disposed of by this common order.2. the dispute relates to classification of the product viz. instant coffee chicory blend manufactured and cleared by the appellants. the appellants had claimed the classification of the instant soluble coffee chicory blend under sub-heading no. 0901.20 of central excise tariff act, 1985. according to the department these goods are classifiable under sub-heading 2101.10. different collectors (appeals) have taken the similar view and since the appellants have become unsuccessful before the lower authorities, they have come before us, by way of these two appeals.3. the ingredients and the process of manufacture of the product in question is as follows :-.....

Judgment:
1. These are two appeals involving common issues and therefore they are clubbed together and are being disposed of by this common order.

2. The dispute relates to classification of the product viz. instant coffee chicory blend manufactured and cleared by the appellants. The appellants had claimed the classification of the instant soluble coffee chicory blend under sub-heading No. 0901.20 of Central Excise Tariff Act, 1985. According to the Department these goods are classifiable under sub-heading 2101.10. Different Collectors (Appeals) have taken the similar view and since the appellants have become unsuccessful before the lower authorities, they have come before us, by way of these two appeals.

3. The ingredients and the process of manufacture of the product in question is as follows :- (v) blending of ground coffee beans with roasted chicory cubes in desired proportion; (vi) extraction of the liquor from the coffee chicory mixture using water; (viii) spray drying the concentrated liquor into powder form - the resultant product is commercially known as "instant coffee chicory blend"; and (ix) packing the instant coffee chicory blend either in tins, bottles or flexi packs.

4. Shri V. Sridharan learned Counsel appearing for the appellants in both the cases submitted that sub-heading 2101.10 is not applicable to the goods in question since the product is an extract of coffee chicory mixture and not an extract of coffee alone. According to him the goods are classifiable under sub-heading 0901.20 or alternatively either under sub-heading 2101.30 or under Heading 21.07 but not under Heading 2101.10.2107.20 - Sterilised or Pasteurised miltone. - Other2107.20 - Put up in unit containers and 6. He said that coffee powder and chicory are blended and liquid is extracted and made into dried powder and the same cannot be called as an extract of coffee. Referring to the KIRK-OTHMER Encyclopaedia of Chemical Technology third edition volume 6, he said that it is a modified coffee i.e. coffee substitutes which include roasted chicory and accordingly coffee chicory blend is familiarly known as French coffee which is different from instant coffee. Commercially instant coffee (pure coffee) is altogether different from soluble coffee chicory blend since both of them have got different taste, aroma or flavour. In terms of Food Adulteration Act these two items are considered separately as can be seen from the relevant provisions of that Act and rules and accordingly, this instant coffee chicory cannot be equated with that of pure coffee. Instant coffee is coffee extract itself and extractor preparations of such goods are classifiable under Heading No. 21.10 but not preparation of chicory. Chicory cannot be eaten as a vegetable or salad or its roasted ground roots used as a flavouring additive in or substitute for coffee and of many substitutes for coffee the most popular is roasted and ground root of the chicory plant, cichorium intybus used mainly in Belgium, the Netherlands, Germany and India. Chicory is also used in some areas to flavour or adulterate coffee as it was stated in the above Chemical Technology and New Encyclopaedia Britannica. There is separate ISI specification for coffee powder and soluble coffee chicory powder and Indian Standard Glossary of Terms for coffee and its products (IS 7236-1974) confines to coffee and its products but not chicory. It was clearly held in the case of Brooke Bond India Ltd. v. Union of India and Others reported in 1984 (15) E.L.T. 32 (AP) that the mixture coffee and chicory cannot be called by individual name of either coffee or chicory but coffee chicory mixture is a distinct commercial commodity differing from the two ingredients constituting the mixture and is also known commercially as French coffee. Referring to sub-heading 2101.10, he said that it must be an extract of pure coffee or preparations with a basis of such extracts, essences or concentrates or with basis of such pure coffee and none of the three portions of sub-heading 2101.10 applies to the item in question. He pointed out that the Chapter Notes to Chapter 21 in HSN is not similar to the excise tariff since Note 2 therein specifies extracts of the substitute referred to Note 1(b) are to be classified in Heading 21.01, but there is a deliberate omission of Chapter Note 1(b) and Note 2 of Chapter 21 of HSN in Central Excise Tariff. It is a roasted coffee substitute and can be classifiable under sub-heading 2101.30 if it is classifiable under Chapter 21. He said that it is more appropriately classifiable under sub-heading 0901.20 since that heading refers to coffee substitute containing coffee in any proportion. Alternatively he also claimed that it is classifiable under Heading 21.07 since it being an edible preparation not elsewhere specified. He contended that item in question is classifiable under Chapter 9 since it is not specifically excluded under that Chapter referring to the decision in the case of Track Parts Corporation v.Collector of Customs, reported in 1992 (57) E.L.T. 98 in support of his contention. He said that the Collector erred in invoking Rule 3b of Interpretative Rules of the Central Excise Tariff Act without exhausting Rule 1. According to Rule 1 classification should be determined according to the terms of the headings and any relative section or chapter notes as it was held in the case of Amit Polymers and Composite Ltd. v. Collector of Central Excise, reported in 1989 (39) E.L.T. 674.

7. While countering the arguments Smt. J.M.S. Sundaram learned SDR submitted that Chapter 9 and Chapter 21 are concerned with the coffee and preparations with a basis of coffee products respectively. Heading 09.01 covers only powder of green coffee seeds in view of the Chapter Note 1 to Chapter 9 and any extraction of liquor from roasted and ground seeds takes goods away from Chapter 9 into Chapter 21. Any process other than curing, roasting or decaffeinating will not be covered under Chapter 9 and that is the bifurcation between Chapters 9 and 21. To be classified under Chapter 9, they must be obtained by a simple process of powdering the seeds of the coffee tree and any extra process other than process mentioned in that heading falls outside the purview of Chapter 9. It is seen from the process of manufacture adopted by the appellants that they extract the liquor from the coffee chicory mixture using water, concentrate the liquor and obtain the powder by spray drying the concentrated liquor. It is clear that the powder is not the one directly derived from the seeds of the coffee tree to be classifiable under Chapter 9. Sub-heading 0901.20 refers to coffee substitutes containing coffee in any proportion. But the item in question is neither a coffee substitute nor it contains the coffee as per definition in Chapter Heading the coffee content has undergone any other process it does not come under Heading 09.01 and it is evident in the instant case that something more complex was done. Coffee chicory mixture is not a substitute for coffee. Substitute means it must be in place of or instead of original and not something added to the original. Coffee adulterated with chicory is not a substitute for coffee and the item is not marketed as coffee substitute, but known as coffee chicory mixture. According to HSN Heading 21.01 covers roasted chicory and other roasted coffee substitutes and extracts essences and concentrates thereof, the products which are intended to be replaced or to be added to coffee. The Wealth of India (A Dictionary of Indian Raw Materials and Indian Products) also recognises two types of coffee powder viz. pure coffee prepared from coffee beans and French Coffee containing chicory. She said that it is not her case that the two products are one and the same in commercial parlance but for classifying the products Heading 21.01 does not distinguish between pure coffee and blended coffee, whereas Chapter 9 makes such distinction covering only pure coffee. Hence the Collector was justified in taking the help of interpretative rules in determining the classification since it is a mixed product. The question of considering the item under 21.07 does not arise as 21.07 concerned only with not elsewhere specified. She submitted that omission of HSN chapter note in Central Excise Tariff Act is not material for classification since Chapter 9 of HSN does not define coffee whereas it was defined in Chapter 9 of Central Excise Tariff Act. Decision in the case of Brooke Bond India Ltd. cited by the appellants is not relevant to this case as it was concerned with the old tariff and the definition in HSN can be relied upon in the absence of definition in the Central Excise Tariff Act as it was held in the case of Singareni Collieries Co. Ltd. v.Collector of Central Excise, 8. In reply it was submitted that whether the item in question is covered under Heading 2101.10 is the core of the case and according to him it will not apply. He submitted that there was no definition of coffee in Chapter 21 and hence the commercial understanding is necessary to know whether these items are one and the same but according to the commercial parlance and in view of the fact that there is separate specification for coffee powder and coffee chicory powder they are different items. Hence the item being a French Coffee, extract or essence of coffee does not cover extract or essence of French Coffee as envisaged in 21.07 and this issue was precisely answered in the case of Commissioner, Sales Tax v. Dunken Coffee Manufacturing Company, reported in 1975 (35) S.T.C. 493 (Bombay) holding that French Coffee in its characteristic was different from coffee powder and what was produced was a new mixture in which some of the original components might have been merged. He said that instant coffee is covered under Heading 2101.10 but not instant French Coffee. Had there been an explanation equivalent to HSN in Central Excise Tariff Act then these goods would be covered under Heading 2101.10 but not otherwise. He said that this issue is squarely covered by Brooke Bond India Ltd., decision and although it was with reference to old Tariff, still ratio is applicable as it was held in the case of Quality Steels Products Pvt.

Ltd. v. Collector of Central Excise, reported in 1993 (65) E.L.T. 513 that mere change in Tariff or incorporating number of headings and sub-headings will not take away the nature of the goods unless name and description of the very goods is so specified under the relevant Tariff Entry for the purpose of classification. He contended that since Chapter 21 of the Central Excise Tariff Act deviates from HSN, the HSN is not relevant as it was observed in the case of Randip Shipping & Transport Co. (P) Ltd. v. Collector of Customs, reported in 1989 (41) E.L.T. 392 that whenever there is any divergence between the two it would be reasonable to infer that the divergence has been intended and to that extent the Brussels Nomenclature will have no application. He also referred to the decisions of the Tribunal in the case of Chetna Polycoats (P) Ltd. v. Collector of Central Excise, reported in 1988 (37) E.L.T. 253 (Tri.) and Amco Batteries v. Collector of C. Excise, reported in 1993 (63) E.L.T. 534, in support of his contention that clear language in the tariff and legal position as clarified by the Court will prevail over HSN explanatory notes.

9. We have considered the submissions made by both sides with reference to the facts, relevant tariff entries and the case law cited by respective side. The process of manufacture of the item is not in dispute. After cleaning and blending the coffee beans, roast and grind them and blending coffee beans with roasted chicory cubes in desired proportion. Extract liquor from the coffee chicory mixture using water and drying the concentrated liquor into powder form which is known as instant coffee chicory blend. Since the mixture of coffee and chicory cannot be called by individual name of either coffee or chicory it cannot be said that it is 'coffee' as defined in Chapter 9 of the tariff. This coffee chicory mixture is a distinct commercial commodity differing from the two ingredients constituting the mixture and may be known commercially as French Coffee or instant soluble coffee chicory blend as in the instant case. Pure coffee or instant coffee is different from the coffee chicory blend. It is not even the case of the Department that coffee and coffee chicory mixture are one and the same in trade parlance but the point to be considered how this mixture is to be classified in the absence of description of coffee chicory blend as such in the tariff entry. Sub-heading 0901.20 refers to coffee substitutes containing coffee in any proportion. Without going into controversy whether substitute containing coffee should be coffee as defined in Chapter Note 1 to Chapter 9 or not, first we have to consider whether this mixture can be called as a coffee substitute.

Substitute means in place of or instead of as it was rightly pointed out by the learned SDR. The learned Counsel for the appellants referred to the new Encyclopaedia Britannica volume 14, KIRK-OTHMER Encyclopaedia of Chemical Technology and Chicory in India by A.Pushparaj to show that of many substitutes for coffee, the most popular is the roasted and ground root of the chicory plant and commonly used in U.S.A., Belgium, Netherland, Germany and France. But in India it is used not as a substitute for coffee but blending with coffee either to add flavour or to adulterate coffee. It is true that chicory plays a prominent role in the major coffee consuming countries in the world.But the consumption of chicory which is used for mixing with coffee rather than using as such in India. The French found that a mixture of chicory and coffee was a delightful combination and popularised the blend throughout Europe and the mixture came to be known as 'French coffee'. Even if we consider that chicory is a coffee substitute but at any rate the coffee chicory mixture cannot be trested as coffee substitute. When once we are of the view that coffee chicory mixture is not a coffee substitute, the Heading 09.01 is not applicable and accordingly classifying the item under sub-heading 0901.20 is ruled out.

We find that the term coffee in Item No. 2 of the old tariff was explained similar to definition given in Chapter 9 of the new tariff with an explanation instant coffee includes instant coffee containing any ingredient in addition to the coffee. But it was held in the case of Brooke Bond India Ltd. (supra) that coffee chicory mixture was different from coffee not falling under Tariff Item 2, but it was liable to duty under Tariff Item 68 as residuary item. Next question arises whether it is classifiable under sub-heading 2101.10 as per the Department or under sub-heading 2101.30 or alternatively under 21.07 as claimed by the party. We find that Chapter 9 deals with coffee upto a particular stage or process and if it undergoes any extra process other than mentioned in Chapter 9, it falls outside the purview of Chapter 9 as it was argued by the Senior Departmental Representative. Chapter 21 mainly deals with the miscellaneous edible preparations and within that Heading 21.01 deals with the coffee products and Heading 21.07 is a residuary entry concerned with edible preparations not elsewhere specified or included. The question of considering the residuary Entry 21.07 does not arise in this case since specific entries are provided for coffee and coffee products under Heading 21.01 in Chapter 21.

Further we come across two sub-headings in the Heading 21.01 viz.

sub-heading 2101.10 and sub-heading 2101.30. Sub-heading 2101.10 applies to preparations with a basis of coffee or with a basis of extracts, essences and concentrates of coffee, while sub-heading 2101.30 applies to roasted chicory and other roasted coffee substitutes, extracts, essences and concentrates thereof. These two sub-headings clearly draw a distinction between coffee and its substitutes, the former to fall under sub-heading 2101.10 and the latter to fall under sub-heading 2101.30. We have already taken the view that this mixture is not a coffee substitute. It is modified coffee inclusive of coffee and chicory. In other words it is an adulterated coffee with mixture whether this was sold as instant coffee or instant coffee chicory blend it is more akin to the description given in Tariff Entry 2101.10. It is an admitted fact that it is a mixture prepared from coffee-chicory powder. Since it was prepared with a basis of coffee extract and in view of the description in sub-heading 2101.10 that preparations with a basis of these extracts, essences or concentrates or with a basis of coffee, we are of the view that the Department was justified in classifying this coffee chicory mixture under sub-heading 2101.10 of Central Excise Tariff. These two appeals are dismissed accordingly.